Gold ETFs witnessed outflows of US$3.2 bn compared to record outflows of US $19.6 bn in Q 2, 2013. On a monthly basis, gold outflows have been moderating at a relatively steady pace since peaking at US$8.7bn in April ..

23 Oct 2013

LONDON (Commodity Online): Gold exchange traded funds (ETFs) continue to witness outflows in Q3, 2013 but it was moderated subtantially compared to Q2 while Silver ETFs saw the largest inflows in Q3, 2013 with US $706 mn of net inflows, according a Quaterly ETF Report of ETF Securities Ltd.

Gold ETFs witnessed outflows of US$3.2 bn compared to record outflows of US $19.6 bn in Q 2, 2013. On a monthly basis, gold outflows have been moderating at a relatively steady pace since peaking at US$8.7bn in April 2013.

The sharp price decline from its 2011 highs, strong physical demand from China and other physical buyers on large price dips, continued central bank buying, and a clearing of a large portion of the tactical buyers that entered the gold market in 2011 and 2012, indicates to us that the bulk of the gold ETP selling is now behind us.

"However, as tactically there are more attractive commodities and assets based on our macro view, it also seems unlikely – barring a severe political or financial shock – that demand for gold ETPs will rise sharply in the near term either. Therefore our base case scenario is relatively balanced gold ETPs flows in the near term. Longer term, given still substantial unresolved debt issues across the developed world, we expect that gold ETP demand will revive," ETFS report said.

Silver ETFsAfter seeing a more than 50% decline in the silver price from its peak, it appears that investors view silver as one of the better value ways to gain exposure to the turn in the global industrial cycle. As around 50% of silver demand is from industry, the silver price has historically had a relatively strong positive correlation with manufacturing lead indicators.

Its hybrid nature as both an industrial metal and as a store of value "hard currency" like gold appeals to many investors who recognize we are experiencing a cyclical pick-up in growth, but remain concerned about growing developed country debt levels and continued risks of currency debasement stemming from extraordinarily easy monetary policies.